When the water utility fund sells water to the General Fund, how is it recorded?

When the water utility fund, which operates as an enterprise fund, sells water to the General Fund, the transaction must be recorded in both funds due to the nature of the exchange.

The enterprise fund, which is responsible for the service of providing water, will recognize revenue when it sells this utility service to the General Fund. This recognizes the income generated from providing a service, reflecting the operation's financial performance.

On the other hand, the General Fund, which typically accounts for the primary operations of the government, will record the payment for the water as an expenditure. This corresponds to the consumption of a service, indicating that resources are being used for governmental operations.

Thus, both funds must record the effects of the transaction: the enterprise fund recognizes the revenue, and the General Fund records the accompanying expenditure. This reflects the overall financial impact of the transaction on both funds, highlighting the inter-fund activities within governmental accounting.